More options on derivatives

SEBI has been given the go-ahead by the Finance Ministry for the introduction of more equity-related derivative products such as options on individual stocks.

SEBI has been allowed to permit the stock exchanges to launch these products provided the risk management systems are in place.

Last year, the NSE launched index futures based on the S&P CNX Nifty, making it the first of the equity derivative products. However, the Government has decided not to permit futures in individual stocks. The main reason for this being the risks related to the delivery of shares. Trading in futures of individual stocks is not allowed even in several advanced markets such as the US. The stock index options are expected to be introduced over the next few months. -- BL Research Bureau